Gerrard said it was an easy decision to make.
“I’m very happy and feel that we are building something special together at the club,” he said.
“I’d like to thank the board for the backing they have given me already in my time at the club and also most importantly, the Rangers fans who have given me and the team such tremendous backing both this season and last.”
Chairman Dave King said: “From the moment I met Steven, I could tell that he was the right man to help us to drive this club forward on the pitch. He has an elite mentality and that is exactly what I was looking for.
“He is relentless in his desire to bring success to our club and we are delighted that he has signed this new contract, which shows his commitment to Rangers.”